How the Finance Act 2026 could affect Charitable Gifts in your Will

Many people choose to leave part of their estate to charity to support causes that are important to them. However, recent changes to the inheritance tax rules mean that the way those gifts are structured could now have a significant impact on the tax position of the estate.

Recent changes introduced by the Finance Act 2026 have created a potential Inheritance Tax (IHT) trap for Wills that leave assets to Charitable Trusts rather than directly to qualifying charities. In fact, depending on how a Will is drafted and and how the Trust operates after death, the charitable exemption may no longer apply in the way many people expect.

As a result of these changes, in some cases, this could result in an unexpected inheritance tax bill and reduce the amount ultimately available for both charitable causes and family beneficiaries.

For this reason, anyone with a Will containing Charitable Trust provisions should consider having their arrangements reviewed.

Why does the charitable exemption matter?

One of the benefits of leaving assets to charity is that gifts to qualifying charities are generally exempt from inheritance tax. This means more of your estate can go to the causes you care about, rather than being lost to tax.

Many individuals have traditionally used Charitable Trusts in their Wills as this approach can offer flexibility, for example, trustees can decide which charities should benefit in the future or support a range of charitable causes over time.

However, recent legislative changes mean that some trust structures may no longer achieve the tax outcome that was originally intended.

What has changed?

The Finance Act 2026 introduced provisions that may affect whether assets passing into certain Charitable Trusts qualify for relief from inheritance tax. The impact will depend on the wording of the Will and the nature of the Trust involved.

The key concern is that a gift that would previously have been expected to qualify for relief may no longer do so automatically. In some circumstances, the inheritance tax exemption could be lost entirely, creating a tax charge that may not have been expected.

Once that opportunity has been lost, it may not be possible to correct the IHT position retrospectively.

This is particularly important in instances where Wills containing Charitable Trust provisions were drafted before the new rules came into force, and so a structure that made sense when the Will was prepared may now produce a very different (and less tax-efficient) outcome.

What could this mean for your estate?

If the charitable exemption is no longer available, assets intended to pass to the Charitable Trust may remain within the taxable estate.

This could result in:

• More inheritance tax becoming payable than expected
• Less passing to relatives and other beneficiaries
• Charities receiving less than you intended

Additional complications for executors and trustees when administering the estate. Unfortunately, these issues may not become apparent until after death, when the estate is being administered, and by that stage, options for correcting the position may be extremely limited.

Could your Will be affected?

It’s important to note that not every charitable gift will be caught by the new rules.

For example, direct gifts to qualifying charities are generally different from gifts made through more complex trust arrangements.

However, a review may be worthwhile if your Will includes:

• A charitable trust that comes into effect on death
• A discretionary structure allowing trustees to choose which charities benefit
• A charitable fund intended to support multiple causes over time
• Older will provisions that have not been reviewed for a number of years
• Wider estate planning arrangements involving trusts and charitable giving

Even where the wording of a Will appears clear, these changes mean the interaction between trust provisions and IHT may not always be straightforward.

In other words, it is no longer enough simply to intend that a charity should benefit. The structure used to achieve that objective has become increasingly important.

Why now is a good time to review your Will

Many individuals assume that once their Will has been prepared, it only needs updating if their personal circumstances change.

In reality, changes in tax legislation can be just as important and tax legislation evolves regularly.

A will that was carefully drafted – and entirely appropriate when signed – may require updating following changes in the law.

This does not necessarily mean that existing Charitable Trust structures are ineffective, nor does it mean that charitable giving should be avoided.

Instead, individuals should take the opportunity to ensure their Wills continue to achieve the outcomes they intended – both from a charitable and tax planning perspective.

Undertaking a review with a qualified Wealth Protection solicitor can help identify whether:

• Your charitable wishes will still be carried out as intended
• Available inheritance tax reliefs remain accessible
• Any potential risks are identified and addressed during your lifetime
• Your executors and beneficiaries are less likely to face unnecessary complications later

As a general rule, we always advise seeking advice on the above issues during lifetime as it’s almost always simpler than leaving it to administrators to attempt to resolve difficulties after you pass away.

Get in touch

As with all financial planning, the extent of the impact of recent changes on your Will structure will depend on the specific circumstances of your estate and the specific wording used in your Will.

To ensure your strategy continues to reflect your wishes, we can help you review existing arrangements, explain how the new rules may affect your estate plan and give tailored advice on the best path forward for your needs in an evolving regulatory environment.

Contact our dedicated Wealth Protection team today via 03333 058375, or by email at [email protected], to arrange a confidential discussion. We’re here to help.